Non-Compete Agreements: What You Need to Know to Protect Yourself

Non-compete agreements are created by employers to prevent employees from taking their talents to a direct competitor. The agreement is usually part of the overall employment contract, though it might be an individual document, and is often for a pre-determined period of time.

If you continue to work for the employer for which you signed the non-compete agreement, chances are you’ll never give it much thought. However, if you leave your employer – either voluntarily or unwillingly – or you’re presented with an offer from a competitor or you decide to launch your own business in the same industry, the non-compete agreement you signed suddenly becomes a major factor.

As such, signing a non-compete agreement can work to limit your options if presented with new job opportunities in a given field.

But if you’re given a lucrative job offer that is predicated on the signing of a non-compete agreement, it’s tempting to sign. After all, why jeopardize the future if your immediate concern is the present?

Unfortunately, people working in all sorts of industries are faced with non-compete agreement dilemmas. How do you know whether you should sign or refuse to do so?

Here are a few things to consider.

Is the Non-Compete Agreement Valid?

The first thing you should consider before signing is whether or not the non-compete agreement document is even valid. In order to determine if a non-compete agreement is valid, you should consult with an attorney. If you signed a non-compete, but it’s later determined that it’s not valid, there isn’t much to worry about in the grand scheme of things as even if your former employer threatens to or actually does sue you, you will ultimately prevail. Caution, however, any action by your former employer can cause you to incur attorney’s fees in defending such action. Thus, even if you ultimately prevail, it may come at a steep cost.

How do you know a non-compete agreement is valid?

• It includes specific and reasonable details about time, scope, and geographic region in which it applies;
• It serves to protect the legitimate business interests of the employer;
• It provides an incentive to the employees for agreeing to not joint a competing agency or company.

In New York, there are a few additional requirements, including:

• It cannot be harmful to the general public;
• It cannot be unreasonably burdensome on the employee.

New York courts have traditionally tended to err on the side of employees when it comes to enforcing non-compete agreements, but it’s still a good idea to understand what you’re signing and be cautious if you have concerns. Further, judicial trends indicate a more neutral review by courts of non-compete agreements eschewing the more traditional favorable reading for employees.

What are You Giving Up?

Every situation is different and it’s impossible to say one way or the other if signing a non-compete agreement is the right move. For some, the trade-off is well worth it if their current situation provides them with enough security and incentive to forego future work with competitors.

On the other hand, if you suspect you might need or want to work for a competitor in the future, you’ll want to think carefully before signing a non-compete. No matter how lucrative your current offer, non-compete agreements can limit your future opportunities and some people aren’t willing to accept his trade-off.

Are You an Employee?

There might be an instance you are asked to sign a non-compete agreement even if you are not an employee of a company. If you are a contract worker and rely on several different companies in your industry, but you are not officially employed by any of them, signing a non-compete agreement can result in serious detriment to your income.

It’s rare as a contract worker you’ll be asked to sign a non-compete, but it happens. In most cases, what the client actually wants you to sign is a non-disclosure, which is different and should not preclude you from working for a competitor. However, before signing any document, it’s a good idea to review how it will limit the opportunities you have in your industry.

Can You Beat a Non-Compete Agreement?

It is possible to get out from under the restrictions of a non-compete agreement.

If a former employer or client is using a non-compete agreement to limit your employment opportunities and you want to take action, you and your attorney can explore the following:

• The employer might be committing non-compete abuse. This means they are using non-compete agreements for reasons other than what is allowed by New York law. For instance, if a non-compete serves a purpose aside from protecting trade secrets or highly unique skills acquired during the course of employment, the employer could be cited for committing non-compete abuse.
• You need to have received a signed copy of the non-compete agreement you signed. When a problem arises, demand a copy of what they have on file. If they can’t produce the fully executed document (even it did exist at one time), their argument against you won’t hold up in court.
• Employers are not permitted to breach their own non-compete agreements. If the agreement has been violated it is unenforceable.
• Were you terminated without cause? New York courts tend to not enforce non-compete agreements when an employee was fired without cause because it poses an undue hardship on employees.
• Is there competition? A non-compete agreement won’t be enforced unless your former employer can prove direct competition. Your new employer will need to provide the exact same services or products for this to be the case.

Being asked to sign a non-compete agreement, especially when you’ve received an offer for a job you really want, can be intimidating. The good news is the restrictions of the non-compete probably aren’t as bad as they seem. Still, it’s a good idea to review the document with an experienced professional before signing.

If you’re locked into a non-compete agreement and you want out, or you have questions about non-compete agreements in New York, we can help. Contact Borrelli & Associates, P.L.L.C. for more information.